A detailed presentation prepared by SAS Partners Team which gives an insight into the provisions of Chapter X relating to Audit & Auditors. This Chapter has undergone a sea of changes with new concepts introduced. This presentation will prove to be beneficial for the Corporate, Professionals & Students and will give a birds eye view of the provisions and concepts.

1. 1
Companies Act 2013Companies Act 2013 –– SessionSession IIII
COMPANIES ACT 2013
Chapter X- Audit & Auditors
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2. Chapter X- Index
Appointment of Auditor
Rotation of Auditor
Disqualification
Duties of Auditor
Prohibited Services
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2
Prohibited Services
Reporting of Fraud to Central Government
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3. Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)
LLP eligible to become Auditor
Appointment for a term of 5 years and ratification in every AGM
Ratification at every AGM by ordinary resolution
Transition period of three years for complying with the requirement
If no auditor appointed or re-appointed at the AGM, existing Auditor continues-Sec 139(10)
Particulars Non Government Company Government Company
Appoint of First Auditor By Board
With in 30days (or)
By CAG
With in 60 days of incorporation (or)
3
With in 30days (or)
By Members
With in 90 days
of incorporation
With in 60 days of incorporation (or)
By Board
With in next 30 days of incorporation
(or)
By Members
With in 60 days of information
Subsequent Auditors By Members
To hold office till conclusion of 6th
meeting, subject to ratification by members
at every AGM
By CAG
With in 180 days from start of the
Financial Year
Casual Vacancy
Resignation By Members
With in 3 months of recommendation of
Board till next AGM
By CAG with in 30 days
(or)
By Board with in next 30 days
Other Reasons By Board with in 30 days
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4. Rotation of Auditor [Sec 139 (2) ] (w.e.f 01.04.2014)
Applicable to certain CLASS OF COMPANIES
Individual Auditors - One term (limited to 5 years)
Firm Auditor - Two terms (limited to 10 years)
Cooling Period of 5 years before the reappointment of the same firm.
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Cooling Period of 5 years before the reappointment of the same firm.
• Listed Companies
• Other Public Company – Paid up Capital ≥ Rs. 10 crores
• Private Company – Paid up Capital ≥ Rs 20 crores
• Other Company – Public Borrowing or Public Deposits ≥ Rs 50 crores

5. Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)
Illustration Explaining Rotation of in case of Individual Auditor.
No. Of consecutive yrs. For which
an individual auditor has been
functioning as auditor in the same
company (in the first AGM held
after the commencement of
provisions of section 139(2)
Max. No. Of consecutive years
from which he may be
appointed in the same
company (including
transitional period)
Aggregate period which the
auditor would complete in the
same company in view of
column I and II
5 years or more 3 years 8 years or more
5
5 years or more 3 years 8 years or more
4 years 3 years 7 years
3 years 3 years 6 years
2 years 3 years 5 years
1 year 4 years 5 years
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6. Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)
No. Of consecutive yrs. For which
an individual auditor has been
functioning as auditor in the same
company (in the first AGM held
after the commencement of
provisions of section 139(2)
Max. No. Of consecutive years
from which he may be
appointed in the same
company (including
transitional period)
Aggregate period which the
auditor would complete in the
same company in view of
column I and II
10 years or more 3 years 13 years or more
9 years 3 years 12 years
Illustration Explaining Rotation in case of Audit Firm
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9 years 3 years 12 years
8 years 3 years 11 years
7 years 3 years 10 years
6 year 4 years 10 years
5 years 5 years 10 years
4 years 6 years 10 years
3 years 7 years 10 years
2 years 8 years 10 years
1 year 9 years 10 years
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7. Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)
Auditors RelativePartner
Indebted GuaranteeSecurities
Holding
Company
7
Auditor Firm
Direct
Business
Relation
Indirect
Subsidiary Associate
Subsidiary
Company
7
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8. Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)
Convicted
for 10
years
Auditor’s
relative
being
Director OR
KMP
Auditor in
more than
20
companies
Disqualification of Auditors
8
KMP companies
Restriction
for Non-
audit
Services
An
Employee
/ officer of
the
Company
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9. Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)
A person, his relative or partner is holding securities or interest in the company or
subsidiary of such company.
A person, his relative or partner which is indebted to the company or its holding company
or associate or a subsidiary company of such holding company.
A person, his relative or partner has given guarantee in connection with indebtedness of any
A person or a firm has a business relationship with the company, its subsidiary, or holding
or associate company or subsidiary of such holding company.
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A person, his relative or partner has given guarantee in connection with indebtedness of any
third party.
A person whose relative is a director or is in the employment of the company as a director or
key managerial person.
A person who has been convicted by court of offence involving fraud and a period of 10
years has elapsed from date of such conviction.
A person whose subsidiary or associate company is engaged in consulting and specialized
services as may be prescribed.
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10. Auditor - Duties
Comply with Auditing
Standards also
Upto 20 Companies
including Private
Companies for each partner
Report to CG in case fraud
committed by officers or
employees
Adverse Remarks in
Auditors Report has to
be commented
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To Report Fraud to the
Board
To Attend GM unless
exempted by the
company
Adverse Remarks in
Auditors Report has to
be read in AGM
Report on internal
financial reporting
system
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11. Auditor not to render certain services [sec 144] (w.e.f 01.04.2014)
The Services are :
Accounting and book keeping services;
Internal audit;
Design and implementation of any financial
information system;
Actuarial services;
Investment advisory services / banking services;
The said services should not
be rendered by a person who
makes use of the Auditor’s
Trade Mark or Brand Name
The said services should not
be rendered by parent ,
subsidiary or associate entity
of the Auditing Firm
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Investment advisory services / banking services;
Rendering of outsourced financial services;
Management services and
Any other kind of services as may be prescribed.
Transition Period: Till the closure of First FY after the commencement of this Act
The said services should not
be rendered by relatives or
any other person associated
with the Auditor of the
Company
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12. Reporting of Fraud to Central Govt. [Sec 143(12)] (w.e.f 01.04.2014)
By Whom Officers or Employees of the Company
Affected person Company
MANNER OF REPORTING TO CENTRAL GOVERNMENT
Within 60 days of knowledge
of Auditor
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Board/ Audit Committee
Board Replies to Queries Board does not Reply
Central Government
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13. Reporting of Fraud to Central Govt. [Sec 143(12)] (w.e.f 01.04.2014)
WHOM TO SEND THE REPORT OF FRAUD
Secretary, MCA
Registered Post with Speed Post and e-mail
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Acknowledgment Due confirmation
This Section also applies to Secretarial & Cost Auditor, while carrying out the
Secretarial Audit u/s 204 and Cost Audit u/s 148 respectively
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14. Reach us
Chennai
Indira Devi Complex, II Floor, # 20 Gopalakrishna Street,
SAS Partners Corporate Advisors Pvt. Ltd.
About SAS PARTNERS;
Over 10 years of market presence and serving
more than 200 businesses from diversified
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Deep rooted entrepreneurial, professional and
Soy Joseph , ACS, ACIS (UK) BL
Sr Partner – Corporate Regulatory
+91 (0) 988421 2845
soy@saspartners.com
Sony George Mathew, MBA, LLB, ACS
Partner – Corporate Regulatory
+91 (0) 98846 56382
sony@saspartners.com
14
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Pondy Bazaar, T. Nagar, Chennai – 600 017,
TN, India.
RMS Apts, Door No 16, 3rtd Floor,
No. 12, Gopalakrishna St, Pondy Bazaar,
T Nagar, Chennai- 600 017, TN, India
Tel: +91 44 2815 2673/ 2815 2674,
Email: chennai@saspartners.com
Deep rooted entrepreneurial, professional and
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Bangalore
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Bangalore – 560 001
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17-04-2014